Saudi Arabia Steeply Hikes Penalties for Labor Violations; Introduces New Three-Tier Penalty System

JEDDAH: In a major move to streamline the domestic labor market and strictly regulate the recruitment sector, Saudi Arabia’s Minister of Human Resources and Social Development, Engineer Ahmad al-Rajhi, has issued a decree steeply raising fines for various labor law violations.

To ensure fair penalization, authorities have categorized business establishments into three distinct groups based on their total workforce:

• Group A: Establishments with 50 or more employees.
• Group B: Establishments with 21 to 49 employees.
• Group C: Establishments with 20 or fewer employees.

Key Violations and Revised Penalties

• Unlicensed Recruitment: Firms operating recruitment services or placing Saudi citizens in jobs without a valid license will face an escalating penalty system, reaching up to 250,000 Saudi Riyals (SAR) for a third-time offense.
• Fake Saudiization: Severe fines will be levied on companies found guilty of “fake Saudiization”—the practice of registering Saudi nationals as employees on paper to meet national quotas without actual employment.
• Discrimination and Workplace Misconduct: Heavy penalties will be imposed on companies practicing workplace discrimination based on gender, age, or disability. Furthermore, establishments that fail to form a dedicated committee to investigate workplace misconduct will face fines up to 3,000 SAR.
• Wage Protection: Employers are legally mandated to pay workers’ salaries on time, in the country’s official currency, directly via bank accounts. Employers cannot withhold salaries without a explicit court order, and submitting a monthly Wage Protection File remains mandatory.
• Settlement of Dues: Upon termination of a labor contract by the employer, all outstanding salaries and end-of-service benefits must be settled within one week. If the contract is terminated at the employee’s request, the settlement period is extended to two weeks.
• Child Labor and Women’s Safety: Employing children under the age of 15 is strictly prohibited, and mandatory maternity leave for female employees must be guaranteed. Additionally, firms employing more than 50 women, where the total number of their children equals 10 or more, must mandatorily provide childcare or crèche facilities.
• Working Conditions: Violating the mandatory midday work ban by forcing laborers to work under direct sunlight or in extreme weather conditions will attract double the fines, calculated per affected worker.

Domestic Workers and the Agricultural Sector

The new decree also cracks down heavily on the exploitation of domestic and agricultural labor:

• Withholding a domestic worker’s passport or abusing their visa status will result in steep financial fines alongside a one-year ban on recruiting new workers.
• Fraudulent recruitment practices in the agricultural and livestock farming sectors will carry a fine of up to 20,000 SAR and an immediate recruitment ban.
• Conversely, strict punitive actions will also be taken against domestic workers who leak employers’ secrets or run independent businesses causing financial losses to their sponsors.

Provision for Appeals

Violators reserve the right to file an appeal with the relevant department of the Ministry within 60 days of the penalty’s announcement. However, the ministry clarified that merely lodging an appeal will not stay or suspend the execution of the penalty. To avoid further legal escalation, the specified fine amount must be settled within the same 60-day window.